Home Depot to open new Greater Toronto distribution centre catering to pros

TORONTO—The Home Depot is opening a new distribution centre in the Greater Toronto Area that will help the company cater to its biggest customers.

The home improvement retailer announced the centre Thursday, saying it will open in the first half of the year in Mississauga, near the Pearson airport.

The facility will target “pro customers” — homebuilders, contractors, remodellers and others who often work on bigger, more complex projects and need large quantities of materials.

Serving these kinds of customers through its retail stores has at times been “not optimal,” said Michael Rowe, president of The Home Depot Canada.

“You may not have all the volume necessary to satisfy their order and so we would cobble together product from other stores or sometimes we just couldn’t say yes to that order,” he said.

When the Home Depot could handle such orders, the merchandise these customers were seeking was often so large or the quantity they needed so high, store staff would often need to fetch products from atop the chain’s mammoth storage units.

“You’re having to block off the aisle, so it’s not the greatest customer experience,” he said.

The Home Depot is betting that its new centre — and three others coming in Detroit, southern Los Angeles and San Antonio — will dramatically change that experience.

The centres will reduce much of the scramble to fulfil large orders and even allow the company to stock additional products that were too large to fit into stores.

“Pros need often 20-foot, 24-foot, 28-foot pieces of lumber, we just don’t have the space and ability inside of our store to carry that,” Rowe said.

Now, it can be ordered specifically for that professional. The company hopes to supply such special orders along with any other materials needed for a job, keeping customers from having to drive around to lumber yards, plumbing suppliers and electrical shops to get all their supplies.

Through the new centre, customers will be able to request their orders be shipped on flatbed trucks directly to job sites, reducing store congestion.

The facility will be about 600,000 square feet, Rowe said, with half dedicated to the flatbed delivery centre and the other half serving as a “big and bulky” distribution centre that can handle large items like lumber, insulation and roofing shingles.

About 20 workers have started at the centre already but the team is expected to hit 30 in the coming weeks.

Rowe considers the centre part of the Home Depot’s “third chapter.” The first, he said, catered to do-it-yourself customers and the second started to look at how to make things more convenient for pros.

The third chapter digs further into that professional side of the business, targeting planned purchases that big customers know they will need to make weeks and even months in advance

“Those purchases can be quite significant orders that are $10,000, $20,000, $50,000,” he said.

Reaping the rewards of the push toward pro will not come easy, TD Cowen analyst Max Rakhlenko suggested in a March 3 note to investors discussing his take-aways from a recent homebuilders conference in Las Vegas.

The company will have to scale its order management system and break through “entrenched” relationships between pros and independents.

“There was healthy skepticism that (Home Depot) could crack the complex pro market,” he said in the note to investors.

“But reps acknowledged that if anyone could do it, it would be the Home Depot given their access to capital, relationships, IT, and already working with these pros in a smaller capacity.”